Wednesday, May 25, 2005

DeLong chimes in, I chime back

Brad DeLong, a liberal economist from Berkeley (an apparent arch-villian of Don Luskin) posted a rather vituperative (that word seems be used a lot recently) rebuttal of the econopundit piece that I helped start. Geez, I am just causing trouble all over. I posted a response to his piece, which I have repeated here. We have the bears and the Dawgs in an intellectual cage match here sports fans!

I am the blogger who originally started this discussion. Although Mr DeLong did not address my argument, and probably didn’t even read it, I will insert my little bit regarding the original point I was trying to make. As far as Mr. Antler’s analysis I will leave that up to him if he so chooses.

“You should reflect on the fact that Krugman's "unemployment lasts much longer than it used to" is part of a tradition of analysis that contrasts the first post-World War II generation--the 50s, 60s, and early 70s--with today. There's nothing in Krugman to make anyone imagine that "used to" applies to the 1980s only.”

Yes there is, he said so. Mr Krugman stated, “Over the past 25 years the lives of working Americans have become ever less secure.” And then proceeded to list 5 supposed economic indicators of this phenomenon. He did not state “Since WWII the lives of working Americans have become ever less secure.” Maybe Krugman is only guilty of vague sentence structure, but this is the impression he leaves with that statement. My original article was asking why he picked that time period, whether the numbers were accurate was only a follow on issue. I can find no particular significance to this number, other than he probably wanted to blame Reagan for the start of this supposed trend, not for any particular economic reason. This is politics, not science. The whole gist of my original post was that this was a ridiculous time period to compare the present situation with. Although things may not be stellar now, can any serious economist, or layman, look back on the era of 10% unemployment, and 20% mortgage rates, and say people felt better off and more “secure” then?

You should cyclically-adjust the series--after all, we know that the duration of unemployment will be relatively high whenever unemployment itself is relatively high--and calculate what the duration would be if the unemployment rate were six percent, as is shown here:

This is an idiotic way of looking at it. You have to remember Krugman was not merely making a scientific observation of the relation of unemployment rates and unemployment duration, he was trying to make a socio-economic point as to how this factor effects people. Adjusting this to some arbitrary 6% not only obscures this effect, it intentionally distorts it. The fact is (once again as I said in my original blog post) that unemployment has trended down significantly in the last 25 years, something that Krugman intentionally avoided mentioning. Which would effect the “security” of the average worker more, 10,000 workers being unemployed for 50 weeks, or 10 million workers being unemployed for 25 weeks? The latter obviously would have a much greater economic impact, although the “duration” as Krugman selectively cites is much greater in the former. The most accurate way of measuring this effect, in this context, is to measure the amount of long term unemployed in terms of the whole workforce, as I did on my blog, not just in terms of those unemployed. If you look at it in this manner, it is not only not “much longer” than 25 years ago, a claim even you cannot defend, but it trends significantly downward.

If Krugman were, for example, trying to examine the historical trends of unemployment duration in order to study certain factors such as education, workplace mobility, outsourcing, unemployment insurance etc. then such a way of adjusting would make sense, but he is not. Instead he is trying to make a political point, so he handpicks certain data that will back up this point. This is the biggest bone I have to pick with him. He used to be a serious economist, now he is nothing more than a political attack dog, like Michael Moore or Ann Coulter, with a degree. I know economics is called the “dismal science” but it is still a science. You are supposed to observe the data and use that to form theories, not come up with a theory based on a political ideology, and then selectively pick data to back it up, ignoring all common sense and contrary data.

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